Autumn Statement: All you need to know
Annual allowance cut
Despite far fewer leaks than the most recent Budget, although to be fair it would have been almost impossible to have more, a couple of highlights from this Autumn Statement escaped.
The widely trailed
cut in the annual allowance from £50,000 to £40,000 was one such leak which came to pass.
The move follows George Osborne’s 2010 Budget when he cut the annual allowance from £255,000 to £50,000.
Osborne said the cuts to the lifetime and annual allowance would save £1 billion in tax relief each year.
The lifetime allowance was also reduced from £1.5 million to £1.25 million.
Second up but far less expected was Osborne’s announcement that the
income limit on capped drawdown arrangements will be increased from 100% to 120%, restoring the 20% uplift.Those in capped drawdown will now be able to take income at 120% of GAD rather than 100%.
Before 2010 reforms took effect individuals could take 120% of the income level set by GAD. This was reduced to 100% in order to prevent investors from depleting their savings too quickly.
In November New Model Adviser® revealed the government was considering relaxing the GAD limits in the Autumn Statement.
Andy Bell (pictured), chief executive of platform provider AJ Bell who led a campaign to restore the 20% uplift, welcomed the measure.
‘Pension savers have spoken and the government has heard,’ he said. ‘This welcome news will hopefully be the start and not the end of a journey towards income drawdown rules that are fair, simple and sustainable.’
Away from the pre-statement speculation and back to business of tax, the government slipped in an increase to the inheritance tax (IHT) nil rate band, which will go up by 1% in 2015-16 to £329,000.
IHT nil rate band has been frozen since 2009 at £325,000. The government said the measure would raise an extra £35 million by 2017-18.
The threshold was frozen in the 2010 Budget until 2014-15. If an estate is worth more than the threshold, IHT is charged at 40% on the amount over the nil rate band.
New protection regime
The government is also planning a new protection regime to counter the lowering of the pensions lifetime allowance from £1.5 million to £1.25 million.
To protect people from retrospective tax charges HM Revenue & Customs (HMRC) said it would consult on plans for a
personalised protection regime as part of the changes, which have also seen the annual allowance reduced from £50,000 to £40,000.
It is said the planned personalised protection will give individuals a lifetime allowance equal to the greater of the value of their pension rights on 5 April 2014, up to £1.5 million, and the standard lifetime allowance, which will be £1.25 million from April 2014.
No news this year on the government’s much loved Venture Capitalist Trusts and Enterprise Investment Schemes, but Osborne still tried to get more investment into start-ups and small businesses.
The chancellor announced that the government would consult on
allowing stocks and shares in AIM-listed companies to be held directly in ISAs.
Perhaps of more interest to the majority of ISA owners, the limit was increased to £11,520.
Long road ahead
However much he reforms the tax and pensions regime the real monkey round Osborne’s back remains the UK’s growth, or lack thereof.
Bad news on this front then as the Office of Budget Responsibility (OBR)
downgraded its forecast for the economy which it said would shrink this year -0.1%.
Osborne said: 'There are no quick fixes. We are making progress, it is a hard road but we are getting there. If we turn back now it would be a disaster.'
CGT allowance increased
Back to tax, and the government increased the capital gains tax (CGT) allowance by 1% to reach £11,000 in 2014/15.
The capital gains annual exemption amount will
increase by 1% each year to £11,100 in 2015/16.
Up until June 2010, everyone paid the same amount of CGT but changes were made so the amount of tax payable depends on how much income tax a person pays.
Personal allowance up
The personal allowance was also up as the government took another step towards it reaching £10,000. It was
increased £235 for April 2013.
The total increase for personal allowance for next year will be £1,335.
This means from April next year people working in Britain can receive £9,440 before paying income tax, compared the £9,205 target the coalition government had initially set for April 2013 in this year's Budget.
Clamping down on tax avoidance
The government will increase HM Revenue & Customs (HMRC) resources to
clamp down on offshore tax evasion and avoidance through the use of trusts, bank accounts and other investment vehicles.
Osborne pledged to raise an extra £2 billion a year by fighting tax avoidance and targeted the closure of 'hundreds of millions of tax loopholes.
Osborne said he wanted to ensure the richest contributed a further £8.5 billion including revenues from a £5 billion raid on UK residents' Swiss bank accounts, which will come into force on 1 January 2013.